Lisa Cook, governor of the US Federal Reserve, speaks at the Peterson Institute For International Economics in Washington, DC, US, on Thursday, Oct. 6, 2022.
Ting Shen | Bloomberg | Getty Images
Federal Reserve Board Governor Lisa Cook on Thursday sued President Donald Trump, seeking to block his unprecedented move to fire her.
The suit, filed in federal court in Washington, D.C., also names Fed Chairman Jerome Powell and the Board of Governors itself as defendants.
Trump said Monday that he was removing Cook because of allegations that she committed mortgage fraud in connection with two residential properties she owns.
“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would the first of its kind in the Board’s history,” Cook’s attorney, Abbe Lowell, wrote in the lawsuit.
“It would subvert the Federal Reserve Act … which explicitly requires a showing of ’cause’ for a Governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not,” Lowell wrote.
Cook is asking the court to declare Trump’s firing order “unlawful and void” and affirm that she remains a board member.
She also wants the court to rule that the claims about her mortgages do not constitute “cause,” which the lawsuit defines as “inefficiency, neglect of duty, malfeasance in office, or comparable misconduct.”
Cook’s suit sets in motion a legal battle that is likely to end up at the Supreme Court.
Powell and the Fed Board are being sued only to the extent that they are able to “effectuate President Trump’s purported termination of Governor Cook,” the suit notes.
CNBC has requested comment from the White House and the Fed on the lawsuit.
Trump’s effort to fire Cook came after months of him complaining that she, Powell and other board members were not cutting interest rates, as he wanted.
The allegations against Cook first surfaced from Bill Pulte, director of the Federal Housing Finance Agency and an aggressive backer of Trump’s criticisms of Powell.
Pulte sent a criminal referral to the Department of Justice, which said it will investigate the mortgage claims against Cook. Pulte, the DOJ and the White House have all demanded that Cook quickly leave her post in light of the allegations.
Within hours of Trump’s termination letter to her being made public on Truth Social, Cook vowed to “continue to carry out my duties to help the American economy as I have been doing since 2022.”
The key question for her lawsuit is whether a judge, and ultimately the Supreme Court, will agree that Trump had so-called cause to fire her.
The Federal Reserve Act says that a president can remove a member of the Fed’s Board of Governors only “for cause.”
Cook has not been charged, much less convicted, of any crime, including mortgage fraud.
If Trump is successful in removing Cook, it would put him on track to have appointed a majority of the Fed Board of Governors’ seven members.
“We’ll have a majority very shortly,” Trump said at the White House during a Cabinet meeting on Tuesday. “So that’ll be great.”
This is breaking news. Check back for updates.